Your home is one of your most valuable assets. That’s why, most of the time, it makes all the sense in the world to take out a mortgage, rather than having cash on hand, when you want to make a home purchase.
The only downside to mortgages is that you’re required to make regular payments. Miss even one, and you’re in for a heap of trouble. But what does it mean, exactly, when you miss a mortgage payment?
Fortunately, we’ve got an in-depth guide for all your mortgage payment questions. Keep reading for everything you need to know!
Pay a Late Payment Fee
Most lenders have a late payment fee that you will need to pay. This fee is typically 1-4% of the balance owed on the payment. If the payment is not made, the lender can also begin the foreclosure process where they repossess the home. Hence, you must understand the mortgage law.
Credit Score Impact
When you miss a mortgage payment, the impact on your credit score can be significant. Lenders report your activity to the three major credit bureaus, which can then lower your credit score significantly. Your credit score is impacted more when you miss a mortgage payment than if you are late on other types of payments such as credit cards or other loans.
Missing one payment could cause your credit score to drop as much as 100 points. This could limit your access to credit, increase the cost of any credit you do qualify for, and make it difficult to obtain a loan. It could even limit employment opportunities if your prospective employer performs a credit check.
Accumulate Interest
Missed payments often lead to the accrual of additional interest, which increases the overall cost of the loan. As a result, the homeowner may find themselves unable to get ahead on the loan or even further in debt. Accumulated interest can also contribute to an increase in the overall amount owed on the loan, turning a potentially manageable one-time payment into an impossible debt to pay off in the future.
Foreclosure of Home
Foreclosure is the legal process wherein a bank or lender takes possession of a mortgaged property if the borrower fails to make payments as agreed. Foreclosure is a lengthy process that involves several steps beginning with a missed payment and ending with the bank taking possession of the home and possibly evicting the homeowner.
During the foreclosure process, homeowners may be held responsible for late fees, attorney’s fees, and court costs. It is wise to contact your lender should you experience difficulty making your payments before the issue becomes severe. If ignored, foreclosure is a very real possibility.
If you get into this situation, then you will need foreclosure defense attorney services. The foreclosure lawyer will represent you when you are facing a bank foreclosure.
Never Miss a Mortgage Payment
Missing a mortgage payment can have serious repercussions, so it’s important to be proactive. Before missing a payment, reach out to your lender or speak with a mortgage lawyer to see if an alternate course of action can be taken, such as a payment deferral.
If you’re already behind, contact your lender to discuss your options. You may be able to get back on track with a repayment plan. Don’t delay – the quicker you take action, the more options you’ll have.
For other helpful tips, be sure to read more of our posts.
